Many members of the PCP community recently attended the Direct Primary Care Summit in Arlington, VA. We'll be sharing their perspectives here over the coming weeks. Today a family medicine resident with a background in business makes "cents" of the model.

By Sahil Jain, M.D.

“What is the value of the service I am providing you?” Dr. Brown used this question in a story that he told at the Direct Primary Care Summit in Washington, D.C., this June, about a $1,200 bill for a plumbing job that saved him a night’s sleep. It highlighted an important aspect of direct primary care that I have often been attracted to — creating value and capturing value. Based on my knowledge from business school, it makes the most sense to me as a practice model in the outpatient medicine world.

The value created in health care is financial, therapeutic and comfort value. For example, I regularly see in my clinic that a chest X-ray and basic labs can help catch early pneumonia, which responds well to outpatient antibiotics. The value created here is saving a few thousand dollars in hospital and emergency costs, the therapeutic benefits of being seen in a relaxed clinic setting and having detailed and thorough discussions with a physician during multiple encounters, and the comfort of being able to work, see your kids, and sleep and eat at home. Value creation is often hindered by incremental costs, such as financial and extra efforts.

Capturing value is how the benefits of the created value are split among the involved parties. The more reasonable and just the split, the happier the involved parties, and the higher the incentive for creating more value in the future. I see the therapeutic and comfort value in the scenario above captured mostly by the patient. The financial value (or savings) may be captured mostly by the payer (insurance company) in the traditional fee-for-service or capitated models. In the long run, the insurance company also captures the value of decreased health costs as this visit and future encounters add up. What is interesting is if we measure captured value against incremental costs for various stakeholders. In the example, the insurance company captures all of the financial value created by the physician and patient, without incurring any of the incremental costs. The provider, however, incurs the cost of an increased responsibility to complete the care plan and ensure a healthy outcome. There is not much incentive for the provider or the patient to continue, except for the therapeutic and comfort values that benefit the patient.

This is where direct primary care excels. Direct primary care is simply an arrangement between a provider and patient to provide basic health services at a fixed, transparent cost. Rather than co-pays and deductibles, the patient pays a fixed monthly and/or per-visit fee for medical services. Allocating funds differently presents the opportunity to more fairly split the pie of created value in outpatient care. For example, a common direct primary care arrangement is that the patient chooses an insurance plan with an assigned number of dollars set aside for a health savings account, which in turn he or she uses to subscribe to a direct primary care practice and pay a monthly fee. In another example, the patient can choose a cheaper insurance plan with a higher deductible, and use the savings in his pocket for direct primary care. In both cases, the patient has direct responsibility for part of the money, which he or she would have otherwise paid to the insurance company. Providers in turn get direct reimbursement for their services, have a reliable cash flow, and avoid the overhead and complexity of dealing with insurance, coding, and the extra staff they require. A monthly subscription model also incentivizes providers to keep patients as healthy as possible for as long as possible. Giving patients the lead role, aligning incentives and rewarding both the patient and provider directly, direct primary care promotes a healthy, long-lasting relationship between providers and patients through early intervention, more outpatient care and regular follow-up.

Direct primary care is like the maintenance plan for your car that you now have a chance to buy locally and separately from your car insurance. You don’t wait until something breaks — you take responsibility for preventive checks. You have a mechanic who will repair it for you for a fixed and fair price, and you don't have to worry whether your insurance will pay for it or what forms to send in to get reimbursed. Your insurance is there to cover any catastrophes or serious breakdowns.

Simply put, direct primary care as a practice model makes more sense to me than the traditional models out there because it creates value that is captured directly by the patient and the provider, incentivizing them appropriately to practice good preventive medicine.

Sahil Jain, M.D., is a second-year family medicine resident at Wellspan York Hospital in York, PA. He has a background in biomedical engineering and health care consulting and is interested in the business and entrepreneurial aspects of family medicine. He has an M.D. from Boston University, an MBA from the Kellogg School of Management at Northwestern University, and an MS in biomedical engineering from Boston University.

Great post and much food for thought! I completely agree with Ryan above that getting patients, especially the young and "healthy" to understand the value of preventive care continues to be a hurdle that no one is addressing particularly well. I see this as a potential area where Direct Primary Care advocates like yourself can take on more of an advocacy role. Thanks for sharing your perspective!

Great post Dr. Jain. It can be difficult for people to understand the real value of excellent primary care, including the Direct Primary Care membership-based model.

For many of my patients with chronic medications, as we do free routine lab work and wholesale meds at 80% discount, it is self evident and constant - they save more on meds than they pay on membership, and have a personal physician 24/7 with $0 copays to boot!

However, "healthy" people who feel they don't "need" an ongoing primary care relationship often times have trouble grasping the concept and value. Health care needs in a given year are unpredictable, but minor injuries/illness or mysterious symptoms are a common occurrence for a good number of otherwise healthy people. I frequently see people join my clinic after such an event that has lead to an absurd amount of bills and debt in the "traditional" system. Often times, rushed docs order more testing than is needed clinically, but also the price tag for even needed things is never considered. I recently had a new patient with a simple wart on the back of his hand (albeit large and inflamed!) recently have 4 encounters (2 rounds of antibiotics, an x-ray, and a dermatology consult) without definitive treatment. He had a high deductible and racked up $3000+ in bills over the ordeal. He finally asked about price before scheduling procedure with derm to remove -- quote was $480! After finding us, he paid me $40/mo membership and I didn't charge for the procedure to remove it. I'd say he got a pretty good deal. Now will he see the value of good primary care forever and maintain his membership? Hopefully so, but there is no doubt it is better for the system.